Best’s News & Research Service - May 22, 2015 10:12 AM (EDT)
A.M. Best Affirms Ratings of Saturn Insurance Inc.
London //BestWire// - A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of Saturn Insurance Inc. (Saturn) (Burlington, VT). Saturn is a captive of BP p.l.c. (BP) (United Kingdom), an integrated global oil and gas company. The outlook for both ratings is stable.
The ratings reflect Saturn's strong risk-adjusted capitalisation and good financial performance over the last two years. In addition, the ratings factor in BP's financial strength and commitment to Saturn.
Risk-adjusted capitalisation is expected to remain strong. Internal capital generation is expected to support an increase in underwritten risk over the medium term from new lines of business. Saturn writes large gross line sizes relative to its balance sheet size but comprehensive reinsurance with its sister company, Jupiter Insurance Limited, protects its balance sheet. Furthermore, Saturn benefits from low investment risk, with cash or short term deposits representing about half of its investment portfolio. The remainder comprises a deposit with BP, which has excellent liquidity terms.
Saturn's underwriting performance was strong in 2014, demonstrated by a combined ratio of 29% (2013: 22%). Technical performance benefited from benign claims experience, reflecting the low-risk profile of the majority of its risks. The captive's importance to and integration within BP's overall risk management framework is a positive rating factor.
Further development of Saturn's business profile, maintenance of good technical performance and continued importance of the captive to the BP group would likely lead to positive rating pressure.
Negative rating actions may arise from material deterioration in Saturn's risk-adjusted capitalisation. In addition, a significant increase in retention levels on Saturn's current and planned programmes without a commensurate increase in its capital base would likely lead to a review of Saturn's ratings.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best's Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology .
Key insurance criteria reports utilized:
- Alternative Risk Transfer (ART)
- Catastrophe Analysis in A.M. Best Ratings
- Evaluating Non-Insurance Ultimate Parents
- Risk Management and the Rating Process for Insurance Companies
- Understanding Universal BCAR
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best's Ratings & Criteria Center.
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